The National Basketball Association is one of the premier professional organizations in sports. But what happens to professional basketball players once the final buzzer sounds on their career?
As a NBA player, you must understand all your benefits when navigating retirement as a professional athlete.
The NBA and NBPA have put together a package to support their players after retirement. There has been a big push from modern-era players to enhance these benefits.
In this blog, I am going to breakdown the NBA's Retirement Plan.
NBA Retirement Plan
Before we dive in, it is important to understand your eligibility.
Just because you sign a contract does not mean you receive these benefits.
In the NBA, you earn benefits based on "Years of Service."
Simply put, "Years of Service" refer to the number of years credited to you for your time in the league.
To earn a "Year of Service" you need to be listed on the NBA Active or Inactive List at least one day during the Regular Season.
Further, to qualify for the NBA benefits, you need to earn at least three "Years of Service."
At that point, you have access to the NBA Retirement benefits.
Benefits for NBA Players
Now that you understand who is eligible, what is included in the NBA Retirement Plan?
First, it is important to note that the benefits have changed significantly over the years. If you played before the latest CBA agreement (April 2023), your benefits might be slightly different.
Additionally, benefits vary depending on the time you played and the "Years of Service" earned.
Since then, the league and its players have increased efforts to enhance the NBA Retirement Plan.
Here is a list of the benefits included in the latest CBA Agreement:
NBA Player Pension
NBA Player 401(k)
NBA Player Health and Wellness Benefit
NBA Post-Career Income Plan
We will dive into each of these benefits below.
NBA Pension Plan
The NBA pension plan dates back to 1965 following in the footsteps of the MLB (1947) and NFL (1962). More now than ever, benefits afforded players is becoming the norm.
This is no different in the NBA.
It began with the creation of The Collective Bargaining Agreement (CBA) in 1957. The CBA was created thanks to a threat of strike by Boston Celtics star Bob Cousy who was unhappy with player benefits.
Since then, the NBPA and NBA have worked closely to agree to terms and conditions for employment in the NBA. The latest update came in April 2023 and runs through the 2029-30 NBA season.
As a professional athlete, you need a plan. Familiarizing yourself with the NBA benefits will help you well into the future.
This starts with understanding your NBA pension.
NBA Pension Benefits
The NBA pension plan offers financial security to players during their retirement years.
In order to start receiving a pension, you must earn three "Years of Service".
The NBA pension can begin as early as your 45th birthday, but typically begins after you turn 62.
So how much will you receive in your NBA pension?
Like most pension programs, it depends on:
Years of Service
Average Salary
Age
The NBA is gracious in the annual amount offered. If you earn at least three "Years of Service," you are guaranteed a minimum pension $56,988 annually if taken at age 62.
This number increases as your "Years of Service" increase.
For example, if you play 10 or more seasons, your annual pension jumps to $215,000 annually.
The NBA pension has been a focal point in recent years. You need an expert in athlete wealth management to help you understand the optimal time to take to your pension benefits.
NBA 401(k) Plan
Next, we will look at your 401(k) options.
First, find a professional who specializes in financial planning for professional athletes before investing in your 401(k).
The NBA 401(k) plan has multiple components.
The plan comprises:
Salary Deferral Contributions
Matching Contributions
After-Tax Contributions
1) Salary Deferral Contributions
This is exactly what it sounds like. NBA players have the option to defer a portion of their salary and put it towards their 401(k).
Why would you do this?
Deferring a portion of your salary allows you to build savings for the future. It is a way to contribute to retirement without actually feeling the burden of your contribution. This is because the money is automatically withheld from your salary and transferred to your 401(k).
No harm, no foul.
2) Matching Contributions
**Please note: Players Association must request matching contributions in writing before the season to receive this benefit.
The NBA offers one of the best 401(k) matches in professional sports.
In 2024, a player can contribute $23,000 in "pre-tax" money to his 401(k) plan. This means he would receive a tax deduction for his contribution.
For example, let's say you are making $1,000,000. In 2024, you contribute a maximum of $23,000 to the plan. Therefore, your taxable income is $977,000 instead of $1,000,000. As a result, your potential tax savings is more than $8,500 assuming the 37% tax bracket.
Here is where the true benefit comes in.
The NBA offers a generous 140% employee match!
Let me put this in numbers for you.
You contribute the max $23,000 to your 401(k) in 2024. The NBA then contributes 140% of this amount, or $32,200.
By investing the maximum amount in your 401(k), the NBA is essentially paying you an additional $32,200 a year.
That is a steal!
3) After-Tax Contributions
Additionally, NBA players have the option of contributing to their 401(k) accounts on an after tax-basis.
This again, helps increase retirement savings for the future.
Whether deferring salary contributions, contributing to your 401(k) or taking advantage of after tax contributions, the NBA 401(k) is a slam dunk when it comes to retirement savings.
NBA Player Health and Wellness Benefit
The NBA is a grueling sport. With 82 regular season games, the sport takes a toll on the body.
The NBA has prioritized the well-being of players off the court with the Health and Wellness Benefit Package.
What is included and how will this impact you?
Here are the core benefits:
Health Reimbursement Arrangement (HRA Benefit)
Insurance/Retiree Medical Plan
Tuition Reimbursement Plan
1.) Health Reimbursement Arrangement (HRA)
**Please note: This benefit is for players who participated in the NBA since 2000-01.
It is important to note that an HRA is not a traditional health coverage plan.
It is an employer-funded group health plan.
Since the HRA is an employer-owned and funded account, the NBA team you play for bears the cost of eligible medical expenses.
For typical HRA accounts, you receive a fixed dollar amount per year and the unused funds can carry over from year to year.
As a result, eligible medical expenses could be accumulated with no payment from you.
The HRA demonstrates the NBA's continued commitment to player well-being.
2.) Insurance/Retiree Medical Plan
The NBA has increased its insurance coverage for players in recent years.
Included in the Insurance Benefits plan are:
Life Insurance
Accidental Death and Dismemberment Benefits
Disability Insurance
Medical Insurance
Dental Insurance
Vision Insurance
Prescription Drug Insurance
Additionally, retired players receive health insurance benefits after the game of basketball. This includes the ability to make provisions and plan modifications to existing plans.
The NBA has made it a priority to support athletes beyond their playing careers by offering these comprehensive coverages.
3.) Tuition Reimbursement
Your time as an NBA player will eventually come to an end.
With that comes the possibility of a new career path.
The NBA provides eligible players with tuition benefits to promote healthy career transitions and personal development.
As of 2023, eligible NBA players with at least three years of service can receive up to $62,500 in tuition benefits each calendar year.
Time and time again, we see athletes unaware of the benefits they have.
These benefits are there to be utilized.
Post-Career Income Plan
Another benefit afforded to eligible NBA players is the Post-Career Income Plan.
While complex, the Post-Career Income Plan gives players an additional income benefit after their playing careers.
These plans include contributions from both teams and players. These contributions are then used to purchase Post-Career Annuities, a fancy term for regular payments after you are done playing.
Currently, the funding of these plans comes from a percentage of Basketball Related Income.
If interested, consult your current team's HR department and read the 2023 CBA.
What Next?
Are you currently taking advantage of the NBA Retirement Plan?
As we are on the cusp of crowning a new NBA Champion, there is no better time to review your benefits than now.
At Moment Private Wealth, we make sure you are up to speed on these benefits.
If you are in the National Basketball Association and want to better understand the NBA benefits, schedule a call with a Moment Founder.
Not sure what questions to ask, check out this video on 10 questions you should ask when interviewing a financial advisor.
Get in Touch With An Advisor
Frequently Asked Questions
Here are some answers to questions I received frequently about this topic.
How does a player qualify for the NBA Retirement Plan? A player must have earned a minimum of three "Years of Service" to be eligible.
Have I earned a Year of Service? Players need to be on the NBA Active or Inactive List at least one day during the Regular Season.
Are there benefits after I end my playing career? Absolutely! If you are in the process of changing careers, the NBA offers a generous tuition reimbursement package.
What age can players take the NBA pension? Players can start receiving their full pension at the age of 45. If deferred until 62, the benefit significantly increases.
Is there a 401(k) match provided by the NBA? Yes! If a player contributes to their 401(k), the NBA will contribute up to 140%.
___________________________________________________________________________________________________________
*Moment Private Wealth offers information on tax and estate planning that is general in nature. Tax and Legal advice are not provided by Moment Private Wealth. Consult an attorney or tax professional regarding your specific legal or tax situation.
